The Purpose of Finger-Pointing on Financial Crisis

The presidential campaign is over and the global financial crisis remains. President-elect Barack Obama offers hope for a fresh start even as he prepares to face a backlog of enormous problems. I believe that our nation is up to any and all challenges, able to achieve a new unity and purpose in these trying times.

Yes We Can, indeed.

You’ll hear some others say that these challenging times leave no room for finger-pointing over the origins of the financial mess we face.

I beg to differ, based on the firm belief that our nation will be served well by understanding how this mess came about. This is part of the challenge, and it will require some sorting through the rubble and—yes—some finger-pointing.

A lot of time could be spent on the Wall Street big shots who played significant roles in the whole affair.

There’s certainly room for a hard look at the culture of monetary hedonism that grew in Corporate America over the past several decades.

There are bigger culprits out there, though. I’m talking about the elected officials who the voters of this nation have trusted to keep an eye on those Wall Street big shots. That’s a basic part of the job for Washington politicians—voters don’t expect
Wall Street big shots to behave themselves.

You’ve probably noticed that politicians generally don’t do very well when it comes to facing their own shortcomings on the job.

You’ve also probably noticed a phrase that’s been on the lips of politicians who want to dodge any blame for what ails our financial system. It began making the rounds during the presidential campaign, as so many elected officials performed the circus act of scurrying for cover even as they lusted after airtime on cable TV shows. Here is the basic message, although you’ll hear plenty of slight variations:

“The problem is that we have a 20th-century regulatory system for a 21st-century financial market.”

Keep in mind that many of the Washington politicians who have uttered this sentiment have the authority to keep an eye on our financial regulatory system. They have been—and most of them remain—in positions to raise questions and seek changes to the system at any time.

Remember also that our financial regulatory system has never been chiseled in stone. It can and has been changed over the years. The truth is that the system itself cannot be outdated—it can be adjusted as needed by our elected officials. They have always had the standing to consider new developments in the marketplace—exotic investment instruments and lax mortgage-lending standards, to name a couple—and seek changes to regulations on such practices.

The only thing outdated in recent years has been the elected officials who have had oversight of our financial regulatory system.

The world changed, and the financial industry changed, too. The politicians who were supposed to ride herd on the financial industry didn’t change.

Go ahead and give some of the politicians in Washington a back-handed benefit of the doubt on the motives behind their lack of oversight—it’s become clear that most of them had little understanding of the forces tearing the financial system to shreds. That still leaves room to suspect that some of them didn’t know because they didn’t want to know—because they were taking in all the campaign donations they needed right up to the point of the meltdown.

Readers can decide how all of that shakes out.
Whatever you decide, though, don’t let any politicians off the hook by accepting the notion that events simply overtook an outdated regulatory system, and there was nothing to be done until the whole thing broke down. This is the worst sort of bunk—the kind that will embolden ignorance and influence peddling in our political class if left unchallenged.

There is good reason to be hopeful about the incoming Obama Administration, and cause to believe that the U.S. can beat this bad spell.

There’s also good reason for all of us to complete the full exercise of getting a grip on what has occurred.

Actually, this piece called on voters to take a hard look at the facts and hold elected officials accountable, noting that politicians are unlikely to face up to their own shortcomings. The crisis is upon us, and it's time to hold some feet to the fire. Don't expect anyone is Washington to volunteer any self-critiques.

Regulatory change in the direction of tighter control and increased scrutiny comes only after a disaster.

You're asking for a lot if you think that when times are good, a politician will succeed in doing what an industry does not want. That's when the public interest, however it's defined, gets subordinated to the demands of narrow business interests.

Now that the roof has fallen in on Wall Street and on housing finance, the public interest will re-emerge.

That's how the world works.

So asking politicians to look in the mirror when they wonder how we got ourselves into our present mess is unrealistic.